UC RUSAL ANNOUNCES FIRST QUARTER 2017 OPERATING RESULTS

Key highlights

Aluminium

Aluminium production[2] in 1Q17 totaled 910 thousand tonnes (-2.1% QoQ), with Siberian smelters representing 94% of total aluminium output. The total production dynamics are largely explained by the number of calendar days in the relevant periods (92 days in 4Q16 and 90 days in 1Q17). Smelters utilization remained at an average high of 95%.

In 1Q17 aluminium sales totaled 985 thousand tonnes (+6.8% QoQ), including value added product (VAP[3]) sales of 436 thousand tonnes (+7.8% QoQ). The increased level of inventories in 4Q16 which were subsequently sold out in 1Q17 was primarily behind the QoQ total sales dynamics.

In 1Q17 the average aluminium realized price[4] increased by 8.3% QoQ to USD1,949/t. The increase was driven by positive dynamics in the London Metal Exchange (“LME”) QP[5] component (+9.0% QoQ to USD1,796/t) and average realized premium component growth (+1.4% QoQ to USD153/t).

Alumina

In 1Q17, total alumina production declined 2.6% QoQ, totaling 1,889 thousand tonnes. Russian operations accounted for 37% of total output. Production volumes at refineries were largely in line with production plans. Seasonal repair works performed at Windalco, Auginish and Bogoslovsk were offset by a strong production performance at the Achinsk and Urals refineries.

Capacity upgrades completed at the Nikolaev and Urals refineries were largely behind the YoY production increase at the refineries in 1Q17.

Bauxite and nepheline ore

In 1Q17, bauxite output totaled 2,869 thousand tonnes (+1.0% QoQ) and nepheline output increased by 7.9% QoQ to 1,056 thousand tonnes. Production volumes at Timan and Kia Shaltyr (nepheline ore[6]) increased by 8.0% and 7.9% QoQ to meet the production plan needs of the Urals and Achinsk alumina refineries, respectively. North Urals production volumes were also driven by the performance of the Bogoslovsk refinery. Kindia production in 1Q17 remained below the historic average but according to mining works schedule, we anticipate the volumes to improve in 2H17. Bauxite Company of Guyana production increased by 13.2% QoQ, which is largely explained by a low base effect.

Market overview[7]

The world economy witnessed a broader based growth in 1Q17, with an increase in business activity, particularly in the advanced economies. Consumer spending particularly for cars, durable goods sales and fixed asset investments continue to be the main driver for metal demand.

In the Eurozone, household spendings increased, unemployment fell, consumer confidence grew and interest rates remained low. Fixed asset investments in the US are expected to grow by 3.5% in 2017 YoY, boosted by the possibility of the approval of the USD1 trillion investment plan. Japanese industrial production continues to rise and exports are expected to grow by 4.5% in 2017 YoY boosted by the strong demand in the neighbouring China.

The Chinese economy showed strong growth at the beginning of the year. The official PMI reached 51.8 in March 2017, while industrial production grew 7.6% YoY in March and GDP in 1Q17 went up 6.9% YoY vs the 6.8% estimated growth.

The LME aluminium price reached its highest level of USD1,955/t in March 2017 and has on average remained stable above USD1,900/t in 1Q17. This was attributable to a growing global metal deficit driven by the US and EU and the expectation of supply disruptions in China coupled with significant production cost inflation.

Aluminum premiums in key consuming regions continued to improve in 1Q17 with, on average, a 27.8% rise compared to 4Q16. This was due to strong demand and a reduced supply in key regions after various smelting capacity reductions/closures (North America, Australia).

The ROW (rest of the world) reported that inventories have approached pre-crisis levels of 3.6mn tonnes in March 2017 and the days of consumption decreased to 46 days from 110 days in 2014-15 whilst continuing to decline at a rapid pace.

Based on CRU estimates, aluminium demand excluding China rose by a strong 3.4% in 1Q17 YoY to 7.1 mn tonnes while production (including eight non-reporting countries) increased by 1.2% YoY to 6.7 mn tonnes, leaving the ROW aluminium market with approximately a 0.4 mn tonnes deficit in 1Q17.

According to the CNIA’s production figures, in 1Q17 China`s primary aluminum production rose 14.2% Y-Y to 8.191 Mt. However, annualized production fell in February by 4.9% MoM and in March by 3.5% MoM, which may mark the beginning of the supply matching process in line with China’s policy to strictly control overproduction.

In terms of additional regulatory measures on April 12 2017, a joint regulation was issued by the NDRC, MIIT, Ministry of Lands and Resources, MEP “On the word to streamline the situation with illegal projects in the primary aluminium industry”. The preamble of the regulation states the necessity to take measures to standardize investment in the construction of aluminium projects and to strictly control overproduction. The government of Changji country (Xinjang) subsequently issued a notice that the construction of three aluminium smelters with a total capacity of 2 mn tonnes per annum is illegal and should be suspended immediately. Other projects and capacities are potentially under risk of termination.

In addition, a significant aluminium cost push in China by more than 40% in 1Q17 and continued cost pressure mainly in carbon raw materials prices brought in a significant impact on high cost non-integrated Chinese smelters operating on thin margins or losses.

Key operating data[8]

(‘000 tonnes)

1Q17

4Q16

Change, % (QoQ)

1Q16

Change, % (YoY)

Aluminium

910

930

-2.1%

916

-0.6%

Utilisation rate

95%

95%

95%

Aluminium foil and packaging products

23.1

22.5

2.8%

18.8

22.9%

Alumina

1,889

1,939

-2.6%

1,873

0.4%

Bauxite

2,869

2,841

1.0%

3,009

-4.6%

Nepheline

1,056

978

7.9%

1,111

-5.0%

Sales data

(‘000 tonnes)

1Q17

4Q16

Change, % (QoQ)

1Q16

Change, % (YoY)

Aluminium sales, including

985

922

6.8%

957

2.9%

BOAZ aluminium product sales

33

31

6.0%

38

-14.2%

other third party aluminium products sales

46

39

18.5%

5

VAP sales (included in the total aluminium sales)

436

405

7.7%

390

11.7%

Aluminium realised price, USD/ tonne

1,949

1,799

8.3%

1,666

17.0%

Aluminium production results

(‘000 tonnes )

Interest

1Q17

4Q16

Change, % (QoQ)

1Q16

Change, % (YoY)

Russia – Siberia

Bratsk aluminium smelter

100%

248

254

-2.2%

251

-1.1%

Krasnoyarsk aluminium smelter

100%

253

257

-1.4%

256

-1.0%

Sayanogorsk aluminium smelter

100%

131

135

-3.3%

130

0.3%

Novokuznetsk aluminium smelter

100%

53

54

-1.1%

53

0.0%

Irkutsk aluminium smelter

100%

103

105

-1.7%

103

0.3%

Khakas aluminium smelter

100%

72

74

-2.4%

73

-1.7%

Russia – Other

Nadvoitsy aluminium smelter

100%

3

3

-2.1%

3

-8.6%

Kandalaksha aluminium smelter

100%

18

18

-0.2%

17

5.2%

Sweden

Kubikenborg Aluminium (KUBAL)[9]

100%

30

31

-4.0%

30

-2.1%

Total production[10]

910

930

-2.1%

916

-0.6%

Remelting of third-party primary aluminium at Volgograd smelter

6

9

-33.6%

12

-50.8%

Total aluminium products output including remelting

916

939

-2.4%

928

-1.3%

Alumina production results

(‘000 tonnes)

Interest

1Q17

4Q16

Change, % (QoQ)

1Q16

Change, % (YoY)

Ireland

Aughinish Alumina

100%

471

509

-7.5%

488

-3.4%

Jamaica

Alpart[11]

100%

—

—

—

—

Windalco

100%

146

155

-6.0%

154

-5.0%

Ukraine

Nikolaev Alumina Refinery

100%

397

407

-2.4%

370

7.4%

Italy

Eurallumina

100%

—

—

—

—

—

Russia

Bogoslovsk Alumina Refinery

100%

234

250

-6.0%

235

-0.3%

Achinsk Alumina Refinery

100%

243

214

13.5%

244

-0.4%

Urals Alumina Refinery

100%

209

205

2.1%

197

6.2%

Boxitogorsk Alumina Refinery

100%

-

-

-

Guinea

Friguia Alumina Refinery

100%

—

—

—

—

—

Australia (JV)

Queensland Alumina Ltd (20%)

20%

187

198

-5.2%

184

1.6%

Total alumina production

1,889

1,939

-2.6%

1,873

0.9%

Bauxite mining results

(‘000 tonnes wet)

Interest

1Q17

4Q16

Change, % (QoQ)

1Q16

Change, % (YoY)

Jamaica

Alpart

100%

-

-

44

Windalco

100%

503

510

-1.3%

488

3.1%

Russia

North Urals

100%

589

607

-3.0%

551

7.0%

Timan

100%

723

669

8.0%

683

5.7%

Guinea

Friguia

100%

—

—

—

Kindia

100%

771

805

-4.1%

925

-16.6%

Guyana

Bauxite Company of Guyana Inc.

90%

283

250

13.2%

319

-11.1%

Total production

2,869

2,841

1.0%

3,009

-4.6%

Nepheline ore production[12]

(‘000 tonnes wet)

Interest

1Q17

4Q16

Change, % (QoQ)

1Q16

Change, % (YoY)

Kiya Shaltyr Nepheline Syenite

100%

1,056

978

7.9%

1,111

-5.0%

Total production

1,056

978

7.9%

1,111

-5.0%

Foil and packaging production results

(‘000 tonnes)

Interest

1Q17

4Q16

Change, % (QoQ)

1Q16

Change, % (YoY)

Russia

Sayanal

100%

9.0

9.2

-2.1%

6.9

31.0%

Ural Foil

100%

5.9

5.3

11.8%

3.9

53.0%

Sayana Foil

100%

0.8

1.1

-26.8%

0.8

-3.7%

Armenia

Armenal

100%

7.4

6.9

7.2%

7.2

2.1%

Total production

23.1

22.5

2.8%

18.8

22.9%

Joint venture operating results

Interest

1Q17

4Q16

Change, % (QoQ)

1Q16

Change, % (YoY)

Boguchanskaya HPP[13]

Electricity generation, mwh

50%

3,176

3,452

-8.0%

3,127

1.6%

Boguchansky aluminium smelter[14]

Aluminium production (‘000 tonnes)

50%

37

37

-1.5%

38

-2.5%

Forward-looking statements

This press-release contains statements about future events, projections, forecasts and expectations that are forward-looking statements. Any statement in this press-release that is not a statement of historical fact is a forward-looking statement that involves known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risk and uncertainties include those discussed or identified in the prospectus for UC RUSAL. In addition, past performance of UC RUSAL cannot be relied on as a guide to future performance. UC RUSAL makes no representation on the accuracy and completeness of any of the forward-looking statements, and, except as may be required by applicable law, assumes no obligations to supplement, amend, update or revise any such statements or any opinion expressed to reflect actual results, changes in assumptions or in UC RUSAL’s expectations, or changes in factors affecting these statements. Accordingly, any reliance you place on such forward-looking statements will be at your sole risk.

About RUSAL

UC RUSAL (www.rusal.com) is a leading, global producer of aluminium, in 2016 accounting for approximately 6.2% of global production of aluminium and 6.5% of alumina. UC RUSAL employs over 61,000 people in 20 countries, across 5 continents. UC RUSAL markets and sells its products primarily in the European, Japanese, Korean, Chinese, South East Asian and North American markets. UC RUSAL’s ordinary shares are listed on The Stock Exchange of Hong Kong Limited (Stock code: 486), global depositary shares representing UC RUSAL’s ordinary shares are listed on the professional compartment of Euronext Paris (RUSAL for Reg S GDSs and RUAL for Rule 144A GDSs). UC RUSAL’s ordinary shares and Russian depositary receipts that are issued on common shares of the Company are listed on Moscow Exchange (RUAL/RUALR).

Disclaimer
The information contained in this press release is for media advice only. The contents are true and accurate at the time of publishing, however, may change over time

[1]Operating data is based on preliminary data and may be updated in the 1Q17 financial results.

[2]Aluminium production represented by salable products output (the number includes all facilities excluding Volgograd remelting).

[3]VAP includes alloyed ingots, slabs, billets, wire rod and high, super, medium purity aluminium. The VAP sales for 1Q16 were updated as a result of addition of high, super, medium purity aluminium volumes.

[8]Unless stated otherwise the production data throughout the report is presented on equity-adjusted basis (for exceptions please refer to the data of the Boguchansky smelter and Boguchanskaya HPP). Production volumes are calculated based on the pro rata share of the Company´s (and its subsidiaries´) ownership.

[9]Does not include remelting of the metal from other RUSAL’s smelters.

[10]Here and further “total production” may not equal to the arithmetic addition of the numbers above presented in the table. The difference arises due to the roundoff of exact numbers (incl. decimals).

[11]The Alpart was sold to an external party (see UC RUSAL’s announcement dated 19 July 2016). The results of Alpart are excluded from UC RUSAL Consolidated Financial Statements from 3Q 2016.

[12]Nepheline ore used as a feedstock for alumina production at the Achinsk alumina refinery.